Virtu Financial is to acquire KCG after entering into a definitive agreement in a deal estimated to be worth $1.4 billion or $20.00 per KCG
KCG said it had reached the decision following a thorough evaluation and the board of directors concluded
the proposal provides compelling value for its stockholders.
“The combination of Virtu and KCG will create a true
industry leader with greater diversification and scale,”
The deal will see Virtu extend its operating model to
KCG’s wholesale market making businesses and expand
the distribution of its technology and execution services
to KCG’s institutional client base.
Virtu said it expects to migrate trading of the combined company onto a single technology, risk management and analytics platform.
Doug Cifu, CEO at Virtu, explained KCG “fits perfectly” with Virtu’s strategic priorities to apply market
making and technological expertise to its clients.
The combined entity will “expand Virtu’s growing
agency execution business by offering clients a combination of Virtu and KCG’s superior algorithms and
proprietary analytical tools,” he added.
Virtu said it will fund the takeover with gross borrowings of $1.65 billion and the sale of $750 million of
Announced in March this year, the deal could create
one of the largest global high-frequency trading firms.
Both firms have seen revenues drop across trading and
market making business units due to low volatility and
decreased trading volumes.
In November, after Virtu announced a 25% reduction
in its net trading income, Cifu said: “opportunities for
most market participants and for market makers were
Deal to close in
limited by the depressed global
volumes and realised volatility.”
Similarly, KCG’s market making
business outside of US equities
has struggled over the last year.
Speaking on its quarterly earnings
call Daniel Coleman, CEO at KCG,
explained the non-US equities mar-
ket making is a “concern and focus
The deal could create a global
powerhouse for market making and
high frequency trading. Both oper-
ate in the same markets, although
use slightly different methods.
Following the close of the transaction, Cifu will remain CEO of the
combined company and Joseph
Molluso, Virtu’s chief financial
officer will remain CFO of the combined company.
Former CEO at Nasdaq, Robert
Greifeld will also join the board of
directors at Virtu immediately after
the deal has closed.
Virtu concluded the merger is expected to close in the third quarter
this year and is subject to regulatory
KCG cancelled its earnings call
following the announcement.
Virtu seals $1.4 billion
KCG takeover deal
per KCG share
Virtu will borrow
billion and sell
to fund deal
Acquisition to go-ahead following Virtu’s
unsolicited bid for KCG in March.